News & Analysis

Apple’s First Quarter Results

January 30, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

Today, Apple reported its First Quarter Results which was largely in-line with expectations, except for the iPhone revenue, which that fell slightly short of estimates.

  • Quarterly revenue came at $84.3bn instead of $83.97bn forecasted. Compared to the year-ago quarter, it is a 5% decline.
  • iPhone Revenue declined by 15% from the previous year. It slightly missed estimates – $51.98bn vs $52.67bn expected.
  • Other products and services grew by 19%.
  • Mac and Wearables, Home and Accessories Revenue reached all-time highs and increased by 9% and 33% respectively.

It was one of the most awaited earnings for the week, not just because it belongs to the FAANG group, but also because Apple issued a rare revenue warning statement at the beginning of the year which exacerbated fears about future earnings and slow global growth. Apple stressed that China’s slowdown was the main driver behind the fall in revenue.

Today’s results are therefore not considered to be horrible, probably because the markets expected much worse. Tim Cook, Apple’s CEO mentioned that:

“While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter’s results demonstrate that the underlying strength of our business runs deep and wide.”

It is the first quarter that Apple has reported its quarterly results under a new structure. We know that iPhone sales are decreasing and the company wanted to switch investors’ attention to the other most popular sectors that are growing. The new reporting structure offers the gross profit margin figures for its services and products segments while withholding unit sales numbers of products such as the iPhones.

Apple is providing the following guidance for its fiscal 2019 second quarter:

  • Revenue between $55 billion and $59 billion
  • Gross margin between 37 percent and 38 percent
  • Operating expenses between $8.5 billion and $8.6 billion
  • Other income/(expense) of $300 million
  • Tax rate of approximately 17 percent

The tech giant is navigating in a fast-moving industry amid foes such as Samsung, which explains why the fall iPhone sales spook investors. Tim Cook acknowledged that people are holding on their older iPhones longer than before and the change in reporting structure shows that there is a shift which investors need to monitor.